Reimbursement cuts threaten local economies relying on hospital jobs
Reimbursement cuts threaten local economies
As those in Congress and the Obama administration continue to debate deficit reduction legislation with an eye on the cost of healthcare, I hope our elected officials will keep in mind the critical role our nation’s community hospitals play in the economies of every city and town across the country. In most communities in our country, hospitals are one of the largest, if not the largest, employers. As a result, they are also one of the primary drivers of the local economy in their communities.
In 2009, the American Hospital Association came to an agreement with the federal government in the crafting of the Patient Protection and Affordable Care Act: The nation’s hospitals agreed to cuts of $155 billion in government reimbursements over a 10-year period, while the government pledged to extend coverage to 32 million more Americans.
The success of this agreement hinges on providing coverage for virtually all Americans, and I fear the legislation that was passed will not bring this result. Even if the individual mandate to buy insurance withstands political and legal challenges, it is clear that many individuals and businesses will forgo health insurance coverage, instead opting for the less costly tax penalty. This does nothing to address the issue of the uninsured, and in fact may actually result in fewer Americans having coverage.
In so many communities across our nation, hospitals are among the largest economic engines driving local commerce. In fact, the AHA recently reported that hospitals are the second-largest source of privatesector jobs in the U.S. We find this to be true in our own local market as well. Studies conducted recently by East Tennessee State University’s College of Business and Technology revealed the critical economic role Mountain States Health Alliance plays in Tennessee and Virginia.
MSHA is a 10-hospital system in the heart of Southern Appalachia. Our major tertiary referral center and network of 12 smaller community hospitals serves 29 counties in four states. The majority of the money spent by MSHA hospitals stays in the immediate area in the form of employee income and locally purchased goods and services. ETSU’s study found that in 2010 alone, MSHA brought $1.3 billion to the region. This spending supported more than 12,000
The AHA recently reported that hospitals are the second-largest source of private-sector
jobs in the U.S.
jobs, representing more than $530 million in labor income in a region hit particularly hard by the recession.
A significant portion of MSHA’s recent economic impact has resulted from a series of construction projects, which we have remained committed to pursuing, even when the local and national economic climate has made such expenditure difficult. Three separate projects accounted for nearly $104 million of our total economic impact in 2010, supporting 752 jobs and more than $31 million in labor income. Time and again, our local contractors told us our projects meant the difference between keeping workers employed and laying them off. These figures show the natural growth and evolution of the healthcare industry also supports economic growth and financial stability in the surrounding regions.
If the Affordable Care Act fails to bring the vast majority of Americans healthcare coverage, hospitals will be hard pressed to forgo $155 billion in reimbursement without suffering significant economic setbacks that would compromise their ability to continue financially enriching their surrounding communities.
Consider the economic quagmire created by Tennessee’s Medicaid waiver program, TennCare. In 1994, the TennCare program was unveiled with the promise that, although providers would experience significant reductions in reimbursement, those losses would be more than mitigated by the provision of coverage for virtually all Tennesseans.
History reveals, however, that this agreement failed all parties—the patients, the providers and the state. TennCare reimbursements were impossibly low, yet overall expenditures still ballooned out of control. After a decade, the state was forced to execute a massive disenrollment, removing 190,000 people from TennCare rolls in order to keep the entire program from collapsing. We can see from TennCare’s example that when a large portion of the population used to calculate the original risk assessment does not receive viable coverage in the final product, the results can be catastrophic.
Some in Congress have argued that healthcare reform is about economics, and I would agree. I think it is obvious that a thriving healthcare industry supports a large number of stable, high-earning jobs and keeps dollars flowing for local areas even in tough economic times. This nation’s healthcare providers are, collectively, an industry that plays a major part in the national economy. But they are also so much more than that.
America’s healthcare system depends heavily on community hospitals, which are more than just outlets of care for local patients; the hospitals themselves are members of the community. The healthcare coverage issues that threaten America’s providers at large have an immediate and very real impact on community hospitals and Main Street economies across the nation. I genuinely hope the critical economic impact hospitals such as ours have on local communities is not forgotten during the ongoing debate over the federal budget and healthcare costs.
Dennis Vonderfecht is president and CEO ofMountain States
Health Alliance, Johnson City, Tenn.